After 9/11, the cost for oil began to go up. Not a lot, of course, but it did go up. Right around 2005, it hit $40.00 a barrel. In 2006, it had already hit $60.00 a barrel. This is when the alarms should start going off in any business man’s head. The SUV was so attractive because the cost for a gallon of gas was insignificant. What’s $20.00 to fill a tank of gas? So, in 2006, they saw the cost of oil really starting to go up.
By the beginning of 2008, it was already around $100 a barrel. This is the beginning of 2008 – One year exactly. Can anyone remember the advertisements that they were placing on the air last March and April? Probably ones advertising the really big, clunky tanks that they wanted to sell. Even when they saw that gas had, for the past seven years, continued to go up, their mentality hadn’t changed. They continued to focus on the fact that SUVs were still selling like crazy at the moment.
This is one of the most dangerous things a business can do. By throwing all their eggs into one basket, they relied on the SUV for its growth. When people couldn’t afford the gas, they got rid of them and stopped buying them. Fast forward to the end of 2008 and you’ve got the automotive bailouts that we have seen. Instead of restructure in 2006 when they saw the cost of oil jump $20 in a single year and at least start creating stronger cars, they focused on the fast money.
It is because of this single act of greed and horrible business that I don’t agree with bailing them out. Through their irresponsibility, they were able to make a ton of money and then, two years later, beg the government to help them because they could not afford anything anymore. Had they focused on more than just the SUV, they’d be weaker, albeit, but they wouldn’t be begging for money. Look at Ford, for example…They may be weak, but they had their cars that gave them some strength. A failed business should not be given money if they are the cause for their failure.
Jacob is the co-founder and owner of a political commentary web publication. One of the issues that he is incredibly interested in is the automotive bailout.
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